Urbanization can help reduce income inequality

Abstract

The global community has been confronted with rising income inequality, in particular, for those least developed countries (LDCs), since the same level of inequality as in advanced countries would push many LDCs into abject poverty. This paper focuses on income inequality in developing countries, particularly LDCs. First, we demonstrate the infeasibility of fiscal measures in resolving income inequality even in developed countries. Second, we show that inequality in LDCs can be largely explained by urban-rural gap. Third, we uncover the benign impacts of urbanization on urban-rural gap. This leads us to propose an out-of-box strategy—containing income inequality by promoting well-managed urbanization. Fourth, we reveal a misperception that may have contributed to the neglect of urban-rural gap in constituting national inequality. This has possibly caused anti-urbanization mentalities and practices, with adverse distributional consequences. Finally, we provide evidence-based policy suggestions aimed at reducing income inequality and poverty—two major goals of SDGs.

Infrastructure inequality is a characteristic of urbanization

“…Second, inherent infrastructure inequalities emphasize multiscale distributive equity as a central imperative for urbanizing countries to progress toward sustainable development. As regions urbanize and infrastructure availability and provisioning expand exclusively within urban areas, we expect a widening urban-rural gap ( 33 ). We also expect emergent inequalities in urban infrastructure provisioning when urban infrastructure growth lags with respect to increases in urban population, as our results show.…”

Urbanization and vulnerable employment: Empirical evidence from 163 countries in 1991–2019

“…Along with the “Internet+” new economy and new business format, the flexible employment, which is considered to be informal employment and non-standard employment, has been redefined ( Wan et al, 2022 ; Wei, 2019 ). For example, the emergence of freelance, short-term employment contracts results in vulnerable employments in service sector in urban contexts.…”

“…The great gap between the rich and the poor among different countries is associated with employment quality, and there are great differences in national wealth levels between developed and developing countries all over the word ( Bloom et al, 2008 ). The benign impacts of urbanization on urban-rural income gap and an out-of-box strategy—containing income inequality by promoting well-managed urbanization—is proposed ( Wan et al, 2022 ). Therefore, countries need to be classified according to labor supply (population size) and wealth level (income level) before testing urbanization effects.…”

The Double-edged Effect of Urban Agglomeration on Regional Inequality

“…Urbanization is a transformative socioeconomic process with far-reaching implications for inequalities 7 . It can both exacerbate and mitigate various forms of disparities, depending on the specific circumstances and policy approaches.…”